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Why adopting a state sales tax would be a bad idea: Guest opinion

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Intel’s rapid “D1X" Hillsboro expansion has driven the company to seek a big new package of tax breaks from Hillsboro and Washington County covering $100 billion in investment over 30 years.
(Mark Graves/The Oregonian)

In his opinion, Mr. Nesbitt says if Intel is getting a property tax break on its proposed Hillsboro plant expansion, then by God it is obvious that Oregon must now a adopt a sales tax.

Mr. Nesbitt is misguided: A sales tax would be regressive -- because a minimum wage worker pays the same percentage of tax for sales taxes on his purchases as does a million dollar-a-year earner---and, worse, sales taxes impose a huge administrative burdens on small businesses, like mom and pop retail shops and food trucks and restaurants, for which the state would pay them nothing for shouldering the entire burden of collecting and accounting for and remitting sales tax revenue charged to each and every one of us for every single purchase at every single store and shop in the state.

Historically, the supporters of sales taxes have railed against income taxes and property taxes on the grounds that neither such tax discourages profligate "consumption," whereas a sales tax is a tax directly on consumption, which is a good idea. Actually, this consumption tax-theory support of sales taxes is misinformed because income taxes have always been, in reality, a consumption tax: We allow deductions against that portion of income that is actually taxed for business expenses, for retirement account contributions (such as IRAs), and for many other expenses, such as home mortgage interest, local property taxes, medical expenses, moving expenses, educational expenses, political campaign contributions and many other "deductible expenses."

As a result, what we really tax through our income tax is consumption because taxable income, after deducting "deductible" expenses, is really just our personal consumption costs. Our income tax is therefore in reality a consumption tax, albeit using a progressive rate of taxation, which sets a higher percentage rate of taxation for someone who makes $500,000 a year than someone who makes the minimum wage.

There are many other reasons to oppose a sales tax, such as the built-in temptation for small businesses to collect a sales tax from every customer and then never turn it over to the state, but it is the sales tax's regressive nature and its unfair imposition of the administrative burden that set a sales tax apart from a progressive income tax, with deductions that transform it into a consumption tax that also encourages home ownership, retirement savings and other behavior that tax policy, by its design, should support and encourage.

If Tim Nesbitt wants to find something new to tax to pay for government, rather than looking to create a sales tax on personal retail purchases, he should think about trying to identify other behaviors that the state should discourage: industrial pollution permits, carbon emissions, criminal behavior by the wealthy, marijuana sales, ugly buildings, sidewalk panhandling, liars, cheaters, bad dressers, crappy restaurants and just about anything else that would be discouraged through taxation policy. Tax those things, not individual consumer purchases.

Just because others find it easy to tax sales, that doesn't mean it is a good idea. Think of something else to discourage by way of taxation policy.